Conflict in Oil Industry, Awash in Crude - NYTimes.com

http://www.nytimes.com/2014/02/13/business/energy-environment/an-oil-i

The Northwest?s Pipeline on Rails | Sightline Institute

http://www.sightline.org/research/the-northwests-pipeline-on-rails

New open-source lifecycle analysis tool for oil production using field characteristics

Schematic chart showing included stages within OPGEE. El Houjeiri et al., Supplemental Information. Click to enlarge.

A team from Stanford University and the California Air Resources Board (ARB) has developed a new open-source lifecycle analysis (LCA) tool for modeling the greenhouse gas emissions of oil and gas production using characteristics of specific fields and associated production pathways. The team describes the Oil Production Greenhouse Gas Emissions Estimator (OPGEE) in a paper in the ACS journal Environmental Science & Technology.

Existing transportation fuel cycle emissions models are either broad-i.e., lacking process-level detail for any particular fuel pathway-and calculate nonspecific values of greenhouse gas (GHG) emissions from crude oil production, or are not available for public review and auditing, the authors note.

Emissions of greenhouse gases (GHGs) from crude oil production vary significantly depending on production practices and crude oil qualities. The use of energy-intensive secondary and tertiary recovery technologies can have significant impacts on emissions. Other major factors are venting, flaring and fugitive (VFF) emissions, which are difficult to measure and estimate. Previous studies show that upstream, well-to-refinery gate (WTR) emissions vary by a factor of 10 from low emissions to high emissions fields. This variability highlights the importance of having the capability to assess the different types of crude oil production operations and under different conditions.

Regulatory approaches, such as the California Low Carbon Fuel Standard (LCFS) and European Fuel Quality Directive (EU FQD), seek to regulate the life cycle GHG emissions for transport fuels.

...To advance the modeling of crude oil production GHGs in a transparent manner, the Oil Production Greenhouse Gas Emissions Estimator (OPGEE) has been developed. OPGEE is built with the goals of achieving more accuracy and better transparency in the assessment of life cycle GHG emissions from crude oil production. OPGEE calculates the energy use and emissions from crude oil production using engineering fundamentals of petroleum production and processing. This allows the model to flexibly estimate emissions from a variety of oil production emissions sources.

-El-Houjeiri et al.

In their paper, Hassan El-Houjeiri and Adam Brandt from Stanford, and James Duffy from ARB, introduce OPGEE and its structure, modeling methods, and data sources, then run it in default mode and on a small set of fictional fields (based on real California fields) selected to have varying characteristics and meant to represent a variety of possible operations. These serve to anchor the sensitivity analysis. The results show the GHG emissions breakdown and the sensitivity of emissions to selected input parameters.

The functional unit of OPGEE is 1 MJ of crude petroleum delivered to the refinery entrance (a well-to-refinery, or WTR system boundary), with emissions presented as gCO₂ equiv GHGs per MJ of crude at the refinery gate. This functional unit is held constant across different production processes included in OPGEE. The energy content of crude oil at the refinery gate is calculated based on API gravity (no account of effects of other crude oil characteristics such as sulfur content). OPGEE defaults to lower heating value (LHV) basis for all calculations, but model results can also be presented on higher heating value (HHV) basis.

Basic structure of OPGEE. Credit: ACS, El-Houjeiri et al. Click to enlarge.

OPGEE calculations use a bottom-up engineering-based approach. OPGEE relies on dozens of calculations across all stages of oil production, processing and transport.

Data for the four fictional fields used in the paper (A, B, C, D) are derived from the online production and injection database and technical reports from the California Department of Conservation, Division of Oil, Gas, and Geothermal Resources (DOGGR).

Field A uses steam injection to decrease crude viscosity. Field B is characterized by very high water-oil ratio (WOR), which represents an inefficient lifting process and significant energy use to manage large amounts of water at the surface (e.g., treatment and re-injection). Field C is characterized by average depth and moderate WOR. Field D is characterized by low depth, low WOR, and higher gas‚àíoil ratio (GOR). The "generic" case uses only the default parameters used to run OPGEE when no data are available.

WTR GHG intensity of California fields compared to OPGEE default. Field A has high GHG because of the use of energy-intensive steam injection. Field B is depleted, with WOR = 40 (e.g., it produces 40 bbl of water per bbl oil). Lifting and handling this amount of fluid is inefficient and consumes large amounts of energy. The water produced is assumed to be re-injected into the reservoir to maintain pressure, increasing the energy intensity of production. Fields C and D have relatively low GHG intensity because they do not use energy-intensive secondary and tertiary production technologies and have moderate to low WOR. Click to enlarge. Credit: ACS, El-Houjeiri et al.

The researchers explored variation in GHG outcomes due to WOR; field depth; oil production volume; steam-oil ratio (SOR); application of a heater/treater in surface oil‚àíwater separation; and flaring rate. OPGEE found that that upstream emissions from petroleum production operations can vary from 3 gCO₂/MJ to more than 30 gCO₂/MJ using realistic ranges of input parameters. Significant drivers of emissions variation are steam injection rates, water handling requirements, and rates of flaring of associated gas.

Results from OPGEE show clear evidence that assuming a single value for the GHG intensity of oil production is problematic because of significant variation in emissions from different operations. This is particularly the case for regulations aiming to reduce WTW GHG intensity of fuels. Future efforts to better understand and characterize this variation are clearly required. Additional efforts will also focus on improving data availability and the data basis for model defaults.

Future work on OPGEE will address scope limitations and coverage of technologies. Coverage will expand to include oil sands operations, as well as heavy oil and other EOR technologies. Supporting technologies, such as hydraulic fracturing and stimulation, will be included to better represent modern production practices.

-El-Houjeiri et al.

The work was funded by ARB.

Resources

• Hassan M. El-Houjeiri, Adam R. Brandt, and James E. Duffy (2013) Open-Source LCA Tool for Estimating Greenhouse Gas Emissions from Crude Oil Production Using Field Characteristics. Environmental Science & Technology doi: 10.1021/es304570m

http://www.greencarcongress.com/2013/05/new-open-source-lifecycle-anal

Trial Starts for BP's Deepwater Horizon Clean Water Act Violations

The civil trial to assess BP's violations of the U.S. Clean Water Act began in New Orleans, a process that will end with additional fines that could exceed four times the amount awarded in the criminal trial.
http://theenergycollective.com/josephromm/191786/trial-starts-bp-s-dee

Keystone XL Pipeline - Will President Obama Violate His Own Inaugural Promises?

On January 21st, our nation listened as President Obama made his second inaugural speech. Thousands were in attendance as he made references to a variety of topics including immigration reform, gun violence, equal pay for women, and of course, climate change.

http://theenergycollective.com/sbattaglia/176986/keystone-xl-pipeline-

New Oil Sands Pipeline Plan Would Dramatically Increase Carbon Emissions

The annual flow of carbon through the proposed twinning project and the proposed Enbridge Northern Gateway project (presuming full operation) would dwarf greenhouse gas emissions from British Columbia, an issue presented here in the past.

http://theenergycollective.com/simondonner/170066/new-oil-sands-pipeli

Coast Guard Conducts Investigation Of Arctic Drilling Ship Contracted By Shell

The Noble Discoverer. Photo: Shell

The problems continue for Shell's Arctic offshore drilling operations.

After getting its Kulluk drilling rig stranded off the coast of Alaska on New Year's Eve - capping off a series of operational mishaps throughout 2012 - Shell's other Arctic drilling ship is being investigated by the Coast Guard for pollution violations.

According to CBS, criminal investigators boarded the Noble Discoverer last November to look into safety and pollution problems, eventually grounding the ship for violations. The Noble Discoverer is a 572-foot drilling ship owned by the Noble Corporation and contracted by Shell for Arctic offshore drilling exploration:

The revelation that another Noble ship working for Shell may have been operating with serious safety and pollution control problems bolstered allegations from environmental activists that the oil industry is unable to conduct safe oil drilling operations in the Arctic Ocean.

The Coast Guard conducted a routine marine safety inspection when Noble's Discoverer arrived at a Seward, Alaska port in late November. The inspection team found serious issues with the ship's safety management system and pollution control systems. The inspectors also listed more than a dozen "discrepancies" which, sources tell CBS News, led them to call in the Coast Guard Investigative Service (CGIS) to determine if there were violations of federal law.

After the Coast Guard's initial inspection of the Noble Discoverer, on Nov. 30, Capt. Paul Mehler, the Officer in Charge of Marine Inspection in Western Alaska issued a Port State Control Detention for the Noble Discoverer, effectively grounding the ship until safety violations were fixed. By Dec. 19, the ship was released from Port Detention but still remains in Seward for additional repairs.

This is not the first time Shell's Arctic drilling operations have been targeted for environmental infractions. Last May, an inspection of the Noble Discoverer revealed over a dozen problems, including issues with its electrical system, water management system, and its engine. The Kulluk, a drilling rig owned and operated by Shell, has also received three warnings for excess pollution and nearly 20 warnings for problems with maintenance systems, reports CBS.

Shell also experienced a massive failure with its oil spill response equipment. During testing last September, the company's oil spill containment dome was "crushed like a beer can" during testing. Just two years before, Shell promised that it had "designed and equipped the most robust oil spill response system in the Arctic known to the industry."

For the last week, Shell has been dealing with a public relations nightmare after losing control of its Kulluk drilling rig near a remote Alaskan island. The Coast Guard has been working to help Shell tow the vessel back out to sea. And this isn't the first grounding incident either. Last July, the Noble Discoverer slipped anchor and was beached for a short time in Dutch Harbor, Alaska.

Concerned about the range of problems Shell has faced in the region over the last year, environmental groups have called on the Obama Administration to revoke the company's drilling permits for Arctic waters.

http://thinkprogress.org/climate/2013/01/07/1405621/coast-guard-conduc

What Economists Missed: Why World Coal Consumption Keeps Rising

A primary reason why coal consumption is rising is because of increased international trade, starting when the World Trade Organization was formed in 1995, and greatly ramping up when China was added in December 2001. Figure 1 shows world fossil fuel extraction for the three fossil fuels. A person can see a sharp "bend" in the coal line, immediately after China was added to the World Trade Organization.
http://theenergycollective.com/gail-tverberg/162771/why-world-coal-con

Energy Shortages - Why Malthus Got His Forecast Wrong

Most of us have heard that Thomas Malthus made a forecast in 1798 that the world would run short of food, and that great famine would result. But most of us don't understand why he was wrong. This issue is relevant today, as we grapple with the issues of world hunger and of oil consumption that is not growing as rapidly as consumers would like-certainly it is not keeping oil prices down to historic levels.What Malthus Didn't Anticipate

http://theenergycollective.com/gail-tverberg/156061/why-malthus-got-hi

http://theenergycollective.com/gail-tverberg/156061/why-malthus-got-hi

12-16-11 2 - Breaking News Keystone XL Pipeline, with Joe Romm - Countdown with Keith Olbermann

With today's decision by the Obama Administration to deny the proposed Keystone XL pipeline project, I came across this interview by Keith Olbermann with Joe Romm back in December talking about the project.  Back in December the Republicans tied the Keystone XL project to passing the Payroll Tax Deduction and attempted to force the Administration to make a decision within 60 days.  Well, the Administration did so and said that the Republicans push to make a decision now forced the Administration to just deny the request outright, because they couldn't make a decision so quickly.

In any case Olbermann and Romm had a great discussion of the points back then.

Peak oil: the summit that dominates the horiz | Business | The Observer

Whistleblowers claimed the IEA figures were unreliable and subject to political manipulation – something the agency categorically denies. But the subject of oil reserves touches not just energy and climate change policy but the wider economic scene, because hydrocarbons still oil the wheels of international trade. Even the Paris-based IEA admits that the world still needs to find the equivalent of four new Saudi Arabias to feed increasing demand at a time when the depletion rate in old fields of the North Sea and other major producing areas is running at 7% year on year. The fields which are producing today are going to significantly decline. We are very worried about these trends," says Fatih Birol. Birol and the wider industry are certainly well aware that the days of "easy" oil are over.

Article Reference: 

http://www.guardian.co.uk/business/2009/nov/29/peak-oil

"Global Oil Depletion" a report on Peak Oil by the UK Energy Research Centre

The UK Energy Research Centre handles research into energy issues for all of Britain. On Oct 8, 2009 they released an indepth study of oil production, the ways to measure oil reserves, estimate current and future production, etc. They paint a picture of peak oil and the need to move to other energy resources. It's not that they are whole-hog embracers of peak oil, instead this is a serious and indepth explanation of the issues with eye opening charts, data and discussion. The following is my summarization of the main report, they also published 7 additional reports containing a flood of technical data.

Abundant supplies of cheap liquid fuels form the foundation of modern industrial economies and at present the vast majority of these fuels are obtained from ‘conventional’ oil. Conventional Oil is the high quality stuff that got us hooked the potent energy source that it is.

Many forecast a near-term peak and subsequent terminal decline in the production of conventional oil as a result of the physical depletion of the resource. Others claim rising oil prices will stimulate investment that will increase supply to meet demand. But those who point to stimulated investment tend to reply on use of nonconventional oil such as tar sands conversion. Also as we'll see financial troubles raise the doubt of whether the required production capacity investments can be made, because of doubt over availability of capital.

While there is popular attention on peak oil, official attention is scarce or dismissive. "Most governments exhibit little concern about oil depletion, several oil companies have been publicly dismissive and the majority of energy analysts remain sceptical."

Key conclusions

1. The mechanisms leading to a ‘peaking’ of conventional oil production are well understood and provide identifiable constraints on its future supply at both the regional and global level.
2. Despite large uncertainties in the available data, sufficient information is available to allow the status and risk of global oil depletion to be adequately assessed.
3. There is potential for improving consensus on important and long-standing controversies such as the source and magnitude of ‘reserves growth’.
   • "The oil industry must continually invest to replace the decline in production from existing fields. The average rate of decline from fields that are past their peak of production is at least 6.5%/year globally, while the corresponding rate of decline from all currently-producing fields is at least 4%/year. This implies that approximately 3 mb/d of new capacity must be added each year, simply to maintain production at current levels - equivalent to a new Saudi Arabia coming on stream every three years.
   • Decline rates are on an upward trend as more giant fields enter decline, as production shifts towards smaller, younger and offshore fields and as changing production methods lead to more rapid post-peak decline. As a result, more than two thirds of current crude oil production capacity may need to be replaced by 2030, simply to prevent production from falling. At best, this is likely to prove extremely challenging.
   • Oil reserves cannot be produced at arbitrarily high rates. There are physical, engineering and economic constraints upon both the rate of depletion of a field or region and the pattern of production over time. For example, the annual production from a region has rarely exceeded 5% of the remaining recoverable resources and most regions have reached their peak well before half of their recoverable resources have been produced. Supply forecasts that assume or imply significant departures from this historical experience are likely to require careful justification."
4. Methods for estimating resource size and forecasting future supply have important limitations that need to be acknowledged.
5. Large resources of conventional oil may be available, but these are unlikely to be accessed quickly and may make little difference to the timing of the global peak.
6. The risks presented by global oil depletion deserve much more serious attention by the research and policy communities.

Policy implications

1. it seems likely that mitigation will prove challenging owing to both the scale of investment required and the associated lead times.
2. Even with incentives associated with climate change policy, there will be strong incentives to exploit high carbon non-conventional fuels. (the massive amounts of coal just waiting to be liquified)
3. Investment in large-scale mitigation efforts will be inhibited by oil price uncertainty and volatility and seems unlikely to occur without significant policy support.

Current economic problems have lead to a major reduction in global oil demand, a major fall in price ($150/bbl in July 2008 to $40/bbl in Jan 2009) and the cancellation or delay of many projects that would act to increase production capacity. Given the long lead time required to get oil production projects underway the cancellation of projects makes likely a supply crunch in a few years e.g. if global oil demand increases again will the demand increase faster than the production projects can get restarted?

These are examples of a couple oil peaks. Conventional oil production raised to a point and then declined once production levels were unable to be sustained.

Classifying the different kinds of oil is key to gauging the problem. When conventional enters terminal decline will there be other resources which can pick up the slack? There's nothing magical about fossil oil, it's possible to make oil through other means. Some questions about this are: Is it possible to replace the supply provided by conventional oil by some other fuel source? Are the replacement fuel(s) better or worse for the environment? Do the replacement fuels have as high an energy return on investment as conventional oil does? How quickly can the switchover to other resources be made?

The energy return on investment (EROI) is a measure of the net energy gain from the production of oil and other resources, once the energy used in extraction and processing has been taken into account.

This is again focused on conventional oil and shows that the peak of discovery for conventional oil was in the early 1960's. Note well above in the key findings that to make up for production decline that new production sources are required at a rate of another "Saudi Arabia" (3 million bbl/day equivalent) every 3 years. The world society has been coasting on the fumes of old oil discoveries for over 40 years. The lack of new oil major field discoveries represents a major problem looming in front of us.

The U.S. DOE EIA produced this forecast of future oil production. Note the two wedges in the middle. They are marked "Crude Oil - fields yet to be found" and "Crude oil - fields yet to be developed". These wedges represent the production shortfall that's looming in front of us. The key phrase is "...yet to be..." because that is production capacity which does not currently exist. For it to exist new oil wells, pipelines, refineries, and transport ships have to be built. Often the new oil is far offshore so "oil well" is an expensive oil platform. Then there are the oil fields yet to be discovered. Where are they and why haven't they been found yet?

Much of the paper is devoted to statistical modeling of recoverable reserves, the claimed reserves, the potential for new discoveries, and the decline rates.

There is a big controversy about claimed oil reserves. Some companies appear to be playing tricks with their claimed reserves and that the publicly claimed numbers are widely thought to be bogus. The root cause is the relative power strength of OPEC decision making is based on their reserves figures. Saudi Arabia claims to have the most reserves but their numbers have been suspicious.

Links: 

The Global Oil Depletion Report: Launched 08.10.09

Refining 101: Summer Gasoline

Just what is summer gasoline? Twice a year, in the fall and in the spring, you hear about the seasonal gasoline transition. The article goes into great depth explaining what this is.

Article Reference: 

Refining 101: Summer Gasoline

Life After the Oil Crash

URL: 

Life After the Oil Crash

Description: 

Books, news and information related to the peak oil phenomena, and examining how society and individuals can survive the coming crisis.

$100 a barrel for oil?

Wake-up call to U.S. on oil?: Discusses a current worry that the fighting in the Middle East could cause the price for oil to become $100 per barrel. I think that's a very realistic concern, if we think about what's happened with the oil prices over the last couple years. The tensions in the Middle East have served to push up the price.

But that's not the only influence causing the oil prices to be so high as they are today.

There's growing oil demand from both India and China. Both countries are in a massive growth period, due to modernization of their economic activity.

There's the continuing rise in world oil demand, regardless of growth in India or China.

There's the peak oil consideration where it looks like world oil production capacity is going to soon reach a peak. Once the oil production peak is reached the price is inexorably going to go up.

The Chicago Tribune article is flawed by looking only at the immediate issue, and the immediate cause for oil price increases. If we think about those three effects, the price for oil is only going to rise. And once the oil production peak is reached, the price for oil is going to increase dramatically.

Malaysia and Indonesia allocating 40% of their palm oil to biodiesel production

Malaysia and Indonesia Set Aside 40% of Palm Oil Crop for Biodiesel Production: Discusses palm oil production. There is 34.282 million tonnes total, of which Malaysia and Indonesia are the two leading producers, with 85% of total world palm oil production.

Source: The Star

Peak oil, fearism, and our future

Consider this article: Energy refugee fleeing $100-a-barrel oil .. "Around the time of the first oil shock in 1973, columnist Art Buchwald penned a satirical column about what life without cheap oil would be like in the 1990s. One day, a father and son go out for their first drive in weeks because fuel costs $8.50 a gallon. 'I feel like a steak,' says the father to his son. And the boy asks, 'Dad, what's a steak?' ... To many Americans, the approaching petroleum calamity remains invisible, but not to my pal John P. Like so many others, he rolled into Arizona from the Midwest a few decades ago bent on fleeing an assortment of ecological and environmental abuses in favor of adventure, clean air, cheap energy and abundant water.... 'You might say that I was an environmental refugee,' the steely-eyed, onetime congressional candidate and former big-time river guide said as he sipped some simple black coffee on the outskirts of Sedona not far from his hideaway in Rim Rock.... 'I always figured that I'd stay here until the managed-care guys came to take me away.'... But my pal has changed his mind. 'See that price?' he said, pointing to a gas station sign advertising fuel for $2.50 a gallon. 'There have been warnings galore, but we've to fix the energy levees, so to speak. That's the last time you'll see it that low; denial about our oil addiction trumps any 12-step program. We are out of here because here in the red rocks and in so many other places, inconvenient facts about energy and water are taboo; oil is headed for $100-a-barrel oil, just the least shock will do it: a tanker blown in the Persian Gulf, a refinery sabotaged.'..." And with that he's planning to move to Idaho to escape the coming fuel catastrophe.

This kind of story just reminds me of one thing. Survivalists. In the 1990's they were escaping the y2k problem. Earlier they were escaping nuclear war. Today there's scares about bird flu, terrorists, peak oil, etc.

Now, I'm very interested in this peak oil scenario. This scenario certainly looks very realistic and I am very concerned about when will it happen.

But ... let's consider the psychological/emotional/spiritual component to this.

What we have is a scary story. People like John P quoted above are taking the fear in that story, and living that fear as if its true, taking drastic actions out of fear.

Ask yourself, if you are having fear, if you are in so much fear you're terrified of the future, how does that affect the range of actions you can take? Doesn't this trigger the fight or flight reflex, causing it to become a survival issue? And, sure enough, there is a lot of evidence with the peak oil scenario that make it look like the survival of our society is at stake.

One of the things that is true about fear is it limits your vision. Your limited vision can see fewer possible solutions.

For example John P is missing out on all sorts of solutions being developed in the world. Instead he's escaping to Idaho expecting the world he knows to collapse into bloodshed. No doubt he's going to stockpile food and guns and be prepared to be killing anybody who wants to take his survival, represented by the food and guns, away from him.

But what about the development of biofuels, of better solar energy systems, better wind energy systems, more reliable nuclear systems, vehicles available from the car companies that can burn non-fossil fuels, and more. He's not seeing them, because the fear doesn't allow it.

If you find yourself in fear, what can you do? There's a range of possibilities.

For example if you're unaware of your fear, you have little ability to navigate out of the fear. Instead it's more likely you'll take rash actions based on the limited vision your fear allows you to have.

The key is to learn to be aware when you are in fear, and to recognize the effects to yourself that come from being in fear.

Next, having the awareness of the fear and the effects is when you can choose differently. What I recommend is a prayer I've learned from Ron Roth: Peace to my thoughts, peace to my emotions, peace to my body, peace to the world. You can also meditate upon the divine presence such as repeating to yourself, and embodying, "come holy spirit, divine holy spirit".

Those practices are not the only ones which will help you come out of fear. They are what I do for myself.

Another thing I've learned is there are many problems, such as the peak oil issue, where my conscious mind, my ego, has no clue how to solve the problem. However, the divine mind does know the answer. The divine, or if you prefer the name 'God', created this universe and surely must have an idea or two of how we in this culture at this time on this planet can resolve the problems facing us.

I don't know what that answer is, but I do know that whatever it is has to happen through us. For 'God' to act in the world 'we' must take actions, because we are God's agents in the world.

What this leads to is an idea. Taking the prayer concept I described above, here's how you might apply it to a world situation like the peak oil scenario, the Iraq war, the impending war in Iran, etc.

First spend some time meditating upon the divine as I described above. Then shift to a prayer like "come holy spirit, peace to the people of Iraq, peace to the soldiers in Iraq, peace to the countries surrounding Iraq, peace to the leaders in Iraq, ...". It helps to visualize inside yourself peace flooding through Iraq.

Now, I should point out that true peace is not the cessation of war. I think of true peace as it is exemplified by forests. A forest has a life of its own which manifests and protects the systemic organization that is the forest. Stuff happens in forests, there are animals hunting for meals, they sometimes kill one another, there are ant colonies having wars with each other, etc. All that stuff is going on, but whatever it is the life of the forest is completely intertwined with all that stuff that's going on. Anything that happens is swallowed by the life force of the forest.

Which was a long way of saying, you can pray for something but let go of attachment to a specific result. Your ego mind may have brilliantly come up with the supposedly perfect solution, but God may have a completely different idea. As the old saying goes, if you want to hear God laugh tell her your plans.

Growing biofuels, moving to widespread use

Growing Biofuels offers an interesting perspective on what it will take to move biofuels (of which biodiesel is one) from a niche to widespread use.  For most purposes, todays biofuels start from the same feedstocks that produce foods like corn syrup or vegetable oil.  This makes for an economic entanglement where high food prices causes high biofuel prices.

Another factoid comes from a study in Canada.  "Diverting half of Canada's canola oil exports into biofuel production would yield only enough biodiesel to meeet 2.7 percent of current diesel demand in Canada".  Indicating that meeting biodiesel needs by diverting food production is a little counterproductive.

The article goes on to discuss an alternative approach.  Using biomass the source is not from material normally meant for food, but is instead leftover biological material like wood chips.

Choren Industries (partnered with Royal Dutch Shell) has developed a method derived from the Fischer-Tropsch method.  That method was used by the Nazi Germany war machine to power their war machines even when they didn't have a source of regular oil.  The Fischer-Tropsch method allowed them to convert coal to gasoline.  Choren has refined the method and is using it to turn any biomass into a liquid fuel.

Ethanol is used widely in Brazil

In the State of the Union speech, GW Bush mentioned Ethanol as a resource "we" should develop. There's been a big scramble towards Ethanol since. Ethanol has some interesting characteristics, in that it's a liquid fuel that's very compatible with gasoline. Unlike biodiesel, ethanol can be readily burned in a gasoline engine and, in fact, ethanol is widely used today in the U.S. Just watch for a sticker on the pump saying "This gasoline may contain ethanol".

Brazil leading effort to boost ethanol use discusses ethanol production and use in Brazil. During the 1970's the "military dictators" then ruling the country pushed for ethanol production and mandated its use in vehicles. That has turned into a golden spot in the Brazillian economy, and they use ethanol rather than gasoline in nearly half of domestic passenger fuel demand.

Brazil has an interesting advantage with all those sugar canes, in that it's sugar which produces alcohol.

This means the U.S. can't directly replicate what they're doing, we don't have domestic sugar cane production to any great degree. Further, when you mention Ethanol, the corn farmers in Iowa get dollar signs in their eyes, and the corn producer lobbiests have been controlling debate around ethanol.

But I want to gather up some details from the article, so here goes.

The article focuses on one plant that works "around the clock" that is distilling 92,500 gallons of ethanol daily that is trucked away for immediate sale at the pumps. But it can only do this during the sugar cane season, apparently (March to November). This means to cover the period outside that season they'll need fuel storage facilities.

This at the end seems to be a critical point:

In Sao Tome, the cooperative that owns the ethanol distillery is betting on its best profits since it bought the operation in 1993. Cocamar's production cost is $1.10 per gallon, and wholesalers are buying the fuel for $2.68 - up from $1.44 last year.

About the only thing that could hurt Brazil's ethanol industry now would be an almost unimaginable plunge in international crude oil prices, currently trading above $60 per barrel, said Almir Hawthorne, the distillery's industrial manager.

"Oil could drop to $35 or $40 per barrel, and ethanol producers would still make money."

They're making $1.24 per gallon more profit than last year, due entirely it would seem to the high price for oil. If oil prices did drop again it's clear their threshold for gaining a profit is around $40 per barrel. But I wonder if, at that price, they'll make enough profit to get the excitement that's circling around them.

That's been the sticker for most of the alternative fuels, whether their price per unit is less than the price for fossil fuel.

It seems every time the price for oil goes high, the makers of alternatives are in the limelight. Today that's ethanol (of several kinds), fuel cells, biodiesel, wind turbines, etc. Unfortunately when the price of oil drops again, the alternatives become less attractive.

This is simple economics, with the market (in its short sighted decision making) going to the source with the least cost. Another factoid in the article is that Brazil invested years of subsidies in its ethanol production industry. It's paying off now, and in the future Brazil will remain fueled even when the peak oil phenomena hits and oil is no longer available.

The point to that is in the energy industry it takes a very long time to develop alternatives. Brazil is an example, where it took years before their ethanol industry was self sustaining.

If the U.S. decisioning is based largely on the short sighted approach of "oh, the market will take care of it", well, I think the market moves too quickly for the development of new energy resources.

When they say "the market will take care of it" the scenario is that oil supply becomes tight, and the oil price rises, and then people start scrambling for alternatives that are cheaper. And, we're seeing this effect going on today. But when the real oil peak hits the supply is supposed to drop off very rapidly from the peak. That should cause a rapid rise in prices which would trigger the market to search for alternatives. But if it's going to take years to develop the alternatives, and in the meantime oil supply drops precipitously, "we" won't have those years.

I believe the current high oil prices are not the true oil peak, but instead based on the war(s) brewing in the Persian Gulf. Especially with the war we are threatening against Iran.

The current high oil price is making for an interesting training ground, inspiring the people go through the steps of finding an alternative to burning fossil fuels. Last year people were dumping their SUV's and motorcycles were becoming popular. This year they may be looking for ethanol.

I suppose if the oil prices stay high long enough, like they are now, the makers of the alternatives will have a long enough window to establish themselves. Here's hoping.

Kuwait, Saudi Arabia, and oil reserves (HoweStreet.com)

Yikes! Things Just Got Worse ... what just got worse? It has to do with the claimed oil reserves in Kuwait. The article discusses a report published by Petroleum Intelligence Weekly (PIW) titled Oil Reserves Accounting: The Case Of Kuwait. Unfortunately the subscription price puts me off so I can't read the report myself.

Supposedly the report discusses details of Kuwait's claimed oil reserves. Kuwait's reported oil reserves are 99 billion barrels. Kuwait has been an oil exporter since 1946, and has a massive oil field. However it's clear the reserves have been overstated.

The PIW report is based upon data circulating within the top echelons of the Kuwait Oil Co. (KOC). KOC is the upstream arm of state-owned Kuwait Petroleum Corp. KOC has primary responsibility for conducting exploration, drilling and production from Kuwait's oil fields. The PIW report claims that Kuwait's remaining proven and nonproven oil reserves total about 48 billion barrels, or 51 billion fewer barrels than previously advertised.

That 51 billion fewer barrels of reserves represent 5% of stated world reserves. Especially troubling is I've read several articles claiming that many oil producing countries have been overstating their reserves as well. What isn't overstated is the world consumption, especially the growing consumption levels in India and China resulting from their economic expansion.

How did this come about? Well, it's not a simple matter of bravado (e.g. the stereotypical men boasting about the size of X or Y or oil fields). In this case it is about distinguishing between "proven," "probable" and "possible" reserves.

Kuwait (and others?) have stated their reserves as the sum of all three. Well, I don't know about you, but "possible" reserves doesn't sound very promising. Especially when you consider most oil wells turn up dry, even on a good day.

As I said, the oil consumption rate is known (and growing). What isn't so clear are the actual reserves. One thing that's clear is the Hubbert model which predicts the peak oil phenomenon. It's not that an oil field produces fine until one day it just fizzles to a stop. Instead it produces fine until the peak occurs, after which it's a constant struggle to get oil out.

This means the world oil situation will appear fine, but with more and more oil fields tilting to the "struggle" phase as each individual oil field peaks.

That, in a nutshell, is the peak oil phenomenon. The last several years of oil use will be characterised by a struggle to retrieve oil, and therefore the actual oil "production" will inexorably decline.

In the face of America stupidly continuing the glut of oil use and gas guzzling way of life, along with India and China rapidly expanding their oil use, this will not be pretty to watch.

I should warn you the author of the article I've linked to -- well -- he works for a financial investment company. They purport to having some investment ideas related to the scenario they describe. While I agree with the scenario, there may be some tilting of the rhetoric on their part.